The slab rates for new tax regime applicable for FY 2026-27
The revised income tax structure under the new tax regime continues for FY 2026-27, helping salaried individuals simplify tax planning while enjoying lower tax rates. The updated structure is designed to reduce tax burden, improve disposable income, and encourage better financial planning for high-income earners.
Income tax slabs for FY 2026-27 (AY 2027-28)
| Annual income | Tax rate |
|---|
| Up to Rs. 4,00,000 | Nil |
| Rs. 4,00,001 – Rs. 8,00,000 | 5% |
| Rs. 8,00,001 – Rs. 12,00,000 | 10% |
| Rs. 12,00,001 – Rs. 16,00,000 | 15% |
| Rs. 16,00,001 – Rs. 20,00,000 | 20% |
| Rs. 20,00,001 – Rs. 24,00,000 | 25% |
| Above Rs. 24,00,000 | 30% |
Under the revised new regime, individuals earning up to Rs. 12 lakh can continue benefiting from the Section 87A rebate, while salaried employees also get a standard deduction of Rs. 75,000. This effectively reduces taxable income and supports better savings opportunities.
How to choose between new and old tax regime
Choosing between the old and new tax regime depends on your salary structure, investment habits, and available deductions. If your salary is above Rs. 20 lakh, comparing both regimes carefully can help you reduce your overall tax liability.
A. When to opt for the new tax regime
- If you prefer lower tax rates with a simpler filing process.
- If you do not actively claim deductions such as HRA, home loan interest, or Section 80C investments.
- If your employer provides limited tax-saving allowances.
- If you want easier tax planning without maintaining multiple investment proofs.
B. When to stick with the old tax regime
- If you invest heavily in tax-saving instruments and insurance products.
- If you claim deductions such as HRA, home loan benefits, NPS, or health insurance.
- If you regularly pay life insurance premiums for yourself or your family.
- If your total deductions significantly reduce taxable income.
For many salaried individuals above Rs. 20 lakh income, the old regime may still offer better savings if they fully utilise deductions and exemptions.
Tax saving options above Rs. 20 lakhs salary - New tax regime
The new tax regime offers fewer deductions compared to the old regime, but certain tax-saving benefits are still available. These deductions can help salaried individuals lower taxable income while supporting long-term financial planning.
| Deduction section | Benefit available |
|---|
| Standard deduction | Rs. 75,000 for salaried individuals |
| Section 80CCD(2) | Employer contribution to NPS |
| Section 80CCH | Contribution to Agniveer Corpus Fund |
| Section 57(iia) | Deduction on family pension income |
| Section 10(10C) | Benefits on voluntary retirement compensation |
| Section 10(10) | Tax exemption on gratuity |
| Section 10(10AA) | Leave encashment exemption |
| Section 24(b) | Interest deduction on rented property home loan |
Additional benefits under the new regime include transport allowance for specially-abled employees and conveyance allowance for official travel purposes.
Tax saving options above Rs. 20 lakhs salary - Old tax regime
The old tax regime continues to provide multiple deductions and exemptions, making it attractive for individuals who actively invest and plan taxes carefully.
Section 80D - Health insurance premium
Health insurance premiums for self, spouse, children, and parents qualify for deductions under Section 80D.
- Up to Rs. 25,000 for self and family
- Additional Rs. 25,000 for parents
- Up to Rs. 50,000 for senior citizen parents
A health insurance plan not only reduces taxes but also helps manage rising healthcare expenses.
Section 80E - Education loan
Interest paid on education loans for higher studies qualifies for tax deductions without any upper limit for up to 8 years.
Section 80G - Donations
Donations made to eligible charitable institutions can qualify for 50% or 100% tax deductions under Section 80G.
Section 80C - Tax-saving investments
You can claim deductions up to Rs. 1.5 lakh through investments such as:
- Public Provident Fund (PPF)
- Employees’ Provident Fund (EPF)
- Equity Linked Savings Scheme (ELSS)
- National Savings Certificate (NSC)
- Sukanya Samriddhi Yojana (SSY)
- Tax-saving fixed deposits
- Home loan principal repayment
- Life insurance premiums
Life insurance plans are commonly used for dual benefits — protecting your family financially while helping reduce taxable income under Section 80C.
Section 80DD - Disabled dependent expenses
Expenses incurred for the medical treatment or care of disabled dependents qualify for deductions:
- Rs. 75,000 for disability above 40%
- Rs. 1.25 lakh for severe disability
Home loan deductions
- Up to Rs. 1.5 lakh deduction on principal repayment under Section 80C
- Up to Rs. 2 lakh deduction on home loan interest under Section 24(b)
Tax benefits on life insurance maturity amount
The maturity proceeds from a life insurance policy may remain tax-free under Section 10(10D), subject to applicable premium conditions prescribed under tax laws.
Tax calculation under the new and old regimes
Tax calculation depends on your selected tax regime, salary structure, and deductions claimed. While the new regime offers lower slab rates, the old regime may provide better savings if you maximise deductions.
Tax slab comparison for FY 2026-27
| Annual income | Old tax regime | New tax regime |
|---|
| Up to Rs. 2.5 lakh | Nil | Nil |
| Rs. 2.5 lakh – Rs. 5 lakh | 5% | 5% |
| Rs. 5 lakh – Rs. 8 lakh | 20% | 10% |
| Rs. 8 lakh – Rs. 12 lakh | 20% | 15% |
| Rs. 12 lakh – Rs. 16 lakh | 30% | 20% |
| Rs. 16 lakh – Rs. 20 lakh | 30% | 25% |
| Above Rs. 20 lakh | 30% | 30% |
The right regime depends on how effectively you use deductions, investments, and exemptions.
How to save tax on salary above 20 lakh?
If your salary is above Rs. 20 lakh, smart tax planning can help you lower taxes legally while improving savings, retirement planning, and long-term financial security.
Make the most of Section 80C
Investing under Section 80C can reduce taxable income by up to Rs. 1.5 lakh. Popular options include PPF, ELSS, EPF, NSC, tax-saving FDs, and life insurance premiums.
Rent out your house property
Rental income allows you to claim deductions on home loan interest and standard deductions under Section 24.
If you live in a rented house, House Rent Allowance (HRA) can help lower taxable income under the old regime.
Invest in National Pension System (NPS)
NPS investments qualify for additional deductions of up to Rs. 50,000 under Section 80CCD(1B), helping you save tax while planning retirement.
Claim deductions on education loans
Interest paid on education loans qualifies for deductions under Section 80E without any maximum limit.
Use Leave Travel Allowance (LTA)
Travel expenses within India may qualify for exemptions under Section 10(5), subject to conditions.
Claim deductions for donations
Donations to eligible charitable institutions can help reduce taxable income under Section 80G.
Invest in life insurance plans
Life insurance plans help protect your family financially while also offering tax-saving benefits on premiums and eligible maturity proceeds.
Exemptions in Income Tax for Rs. 20 lakh salary
Your salary package contains multiple components, and some may qualify for exemptions or deductions under the old tax regime.
Salary breakdown formula
Annual salary – Exemptions = Taxable salary
Taxable salary – Deductions = Net taxable income
Structure of CTC and related tax treatment
| Salary component | Tax treatment |
|---|
| Basic salary | Fully taxable |
| Dearness allowance | Fully taxable |
| House Rent Allowance | Partially exempt |
| Leave Travel Allowance | Exempt under conditions |
| Mobile/internet reimbursement | Exempt for official use |
| Children education allowance | Exempt up to specified limit |
| Food coupons/meals | Exempt within prescribed limits |
| Standard deduction | Rs. 75,000 |
| Professional tax | Deduction allowed |
Which regime is better for 20 lakh LPA to save tax?
The ideal tax regime depends on your deductions, investments, and financial goals. If you actively invest in life insurance, health insurance, home loans, and retirement products, the old regime may provide higher tax savings. However, if you prefer lower slab rates and simplified filing, the new regime can be beneficial.
For salaried individuals with limited deductions, the new regime may reduce tax liability. On the other hand, taxpayers who maximise deductions under Sections 80C, 80D, 24(b), and NPS may find the old regime more rewarding.
How to reduce your taxable income legally?
Reducing your taxable income legally becomes easier when you use the right mix of tax-saving investments, deductions, insurance plans, and retirement-focused financial planning strategies.
Maximise Section 80C benefits
Invest in PPF, ELSS, EPF, NSC, tax-saving FDs, and life insurance plans to reduce taxable income up to Rs. 1.5 lakh.
Claim HRA and home loan deductions
Use HRA exemptions and home loan deductions to lower taxable income under the old regime.
NPS investments provide additional tax deductions while supporting retirement planning goals.
Health insurance premiums qualify for deductions under Section 80D while offering financial protection during medical emergencies.
Use education loan and donation benefits
Education loan interest and eligible donations can further reduce taxable income.
Choose the right tax regime
Compare both tax regimes carefully before filing returns to identify which option offers better tax savings.
Conclusion
If your salary is above Rs. 20 lakh, smart tax planning can help you reduce tax liability while improving long-term financial security. By selecting the right tax regime and using deductions through life insurance, health insurance, retirement investments, and other eligible instruments, you can legally optimise taxes and increase savings. Understanding how to save tax for salary above Rs. 20 lakh can help you create a stronger financial future while protecting important life goals.
